Foreign liquor companies looking to tap a large and growing market for their products in the country are being held back by the conflicting policies of the Central and state governments.

In June 2007, the Central government announced that all foreign direct investment or FDI in the liquor business would happen through the "automatic" route and that liquor manufacturing would no longer need a licence — a practice India had for most manufacturing businesses in the 1980s that has since been relaxed in most cases.

If this move hasn’t resulted in a rush of FDI in liquor, it is because of state laws. States levy a tax, called excise duty on all liquor manufactured and their laws make it mandatory for companies to obtain a licence before they start manufacturing liquor. Several foreign firms have discovered that it is easier to forge joint ventures or partnerships with local companies than obtain a licence on their own. The FDI policy was proposed by the Union government’s Department of Industrial Policy and Promotion and supported by the law ministry.

"The whole exercise of securing a fresh manufacturing licence is not only time-consuming but also cumbersome in some states, as there is no uniform law in the country," said Vivek Chhabra, director, group business development, Asia Pacific Breweries Ltd, a Singapore-based beer maker present in India. "In this context, automatic foreign investment clearance doesn’t make sense," he added.